In May, net foreign direct investment inflows fall to a 16-month low

By means of Luisa Maria Jacinta C. Jocson, Reporter

Net foreign direct investment (FDI) inflows fell to a 16-month low in May amid a decline in equity investments, the Bangko Sentral ng Pilipinas (BSP) reported.

Preliminary data from the BSP showed net foreign direct investmentFThe low fell 1% to $499 million in May, compared to $504 million a year ago.

Month after month, net inFThe lows fell 10.3% from $556 million in April.

May saw the lowest monthly foreign direct investmentFlow since $478 million in January 2023.

“This decline was mainly due to the 31.7% decline in non-residents’ net equity investment (excluding reinvestment of profits),” the BSP said.

Central bank data shows net equity investment, excluding the reinvestment of profits, fell 31.7% to $161 million from $235 million a year earlier.

Equity placements fell 32.1% to $174 million, while withdrawals fell 36.9% to $14 million.

Earnings reinvestment amounted to $97 million, down 3.7% from $101 million a year earlier.

Investments in stocks and mutual fund shares also fell 23.3% year-on-year to $257 million, compared to $336 million a year ago.

On the other hand, non-residents’ net investments in debt instruments of local branches rose 43.4% to $242 million in May, compared to $169 million a year ago.

Per source, equity placements came mainly from Japan (75%), followed by the United States (10%) and Hong Kong (7%).

These were mainly invested in the manufacturing, real estate and arts, entertainment and recreation sectors.

FIVE MONTHS FDI
For the Ffirst Ffive months of the year, net foreign direct investment inFThe lows rose 15.8% to $4.024 billion, compared to $3.475 billion in the same period a year ago.

Foreign investment in debt instruments rose 1.7% to $2.479 billion in the January-May period, compared to $2.436 billion the year before.

On the other hand, reinvestment of profits fell 1% to $407 million at the end of May, compared to $411 million last year.

Investments in stocks and mutual fund shares rose 48.8% to $1.545 billion in the period ended May, compared with $1.038 billion a year ago.

Net foreign equity investment rose 81.4% to $1.139 billion in the United States Ffive-month period compared to $628 million a year ago.

This while the placement of share capital increased by 75.3% to $1.387 billion Admissions rose 51.7% to $248 million.

In the five-month period, these placements mainly came from the United Kingdom (56%), Japan (29%) and the United States (6%).

“While the overall trend for the first five months of the year remains positive with an increase of 15.8%, May data points to a possible slowdown,” Security Bank Corp. Chief Economist Robert Dan J. Roces said. in a Viber message.

“Factors such as global economic uncertainties, domestic challenges and regional competition may have contributed to this,” he added.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the lower foreign direct investment was due to “risk aversion largely caused by geopolitical risks in light of the unprecedented direct attacks between Iran and Israel (in April). ”

Mr Roces also noted that foreign direct investment inflows are sensitive to interest rates.

“FDI data was also weighed down in recent months by still relatively higher global and local prices and interest rates, which increased financing costs for global and local investors and reduced foreign direct investment below pre-pandemic levels,” the added Mr Ricafort added.

The BSP has maintained its benchmark interest rate at 6.5% since October last year, the highest level in more than 17 years.

The central bank raised borrowing costs by 450 basis points (bps) from May 2022 to October 2023 to curb inflation.

The Monetary Board will meet for its next rate-setting meeting on Thursday (August 15). A Business world A poll showed that nine of the sixteen analysts surveyed during the meeting expect a rate cut of 25 basis points.

“Achieving the target of $9.5 billion in foreign direct investment by 2024 will require sustained investor confidence and a favorable economic environment,” Mr Roces said.

The BSP expects to record net foreign direct investmentFlow of $9.5 billion this year.